EXCHANGE CONTROLS, INTERNATIONAL CAPITAL FLOWS AND SAVING-INVESTMENT CORRELATIONS IN THE UK - AN EMPIRICAL-INVESTIGATION

This paper reexamines the Feldstein-Horioka approach to measure the de gree of international capital mobility, focusing on the difference bet ween the short-run and the long-run saving-investment correlation coef ficient. The authors also investigate the effectiveness of the aboliti on of exchange control which, in October 1979, ended a long period of restrictions on capital flows between the UK and the international eco nomy. Their results suggest that the short-run saving-investment corre lation is significantly higher than the long-run one. Unlike most of t he relevant literature, the empirical evidence suggests that the UK is financially highly integrated with the world economy after 1979.